Hartford Business Journal

14 Hartford Business Journal • decemBer 26, 2016 www.HartfordBusiness.com Scorecards Don Klepper-Smith Chief Economist and Director of Research, DataCore Partners LLC What's your 2017 economic outlook for Connecticut? Modest Growth How many jobs will Connecticut add? 10,000 to 12,000 What will Connecticut's unemployment rate be at the end of 2017? 5.5%-6% What type of GDP growth will Connecticut see in 2017? 1%-1.5% Which industries will add the most jobs? Retail, leisure and hospitality Which industries will lose the most jobs? Health care and manufacturing Explain your 2017 economic outlook for Connecticut. There's clearly been an escalating "crisis of confidence" in Connecticut's busi- ness community that's been long ignored, and it's not going to turn around quickly. Research shows that both business confidence and consumer confidence don't turn on a dime, and that it takes many years to rebuild confidence once it's lost. The present lack of fiscal discipline in state and local finances is clearly one contributing factor. With state and local budgets climbing 3, 4 and 5 percent annually, and those on fixed incomes earning 1 to 2 percent, it doesn't take a degree in math to understand that "mounting fiscal stress" is already baked into Connecticut's fiscal picture over the next 10 to 15 years. The Connecticut economic forecast for 2017 calls for growth that is roughly half the national average. Therefore, I'm forecasting that we'll see growth in the 1 percent to 1.5 percent range based on modest gains in manufacturing output, a fractional rise in real disposable income, and below-average growth on non- manufacturing employment. Edward J. Deak Professor Emeritus, Fairfield University What's your 2017 economic outlook for Connecticut? Modest Growth How many jobs will Connecticut add? 5,500 What will Connecticut's unemployment rate be at the end of 2017? 4.9% What type of GDP growth will Connecticut see in 2017? 1.5% Which industries will add the most jobs? Education and health Which industry will lose the most jobs? Government Explain your 2017 economic outlook for Connecticut. A combination of local and national events, trends and uncertainties have made developing a Connecticut economic forecast a more perilous activity than usual. First, the state has lost jobs in five of the last six months from June through November. Connecticut is one of only a handful of states that has failed to regain more jobs than were lost in the Great Recession. Connecticut's year-over-year job gains are still minimally positive, and upward job revisions are always possible. However, the current 12 month loss of jobs in government, retail and leisure/hospitality are of concern. Connecticut's struggle to regain lost jobs reflects the minimal gains in real income and gross state prod- uct. Are these disturbing long-run trends or temporary statistical flukes? Second, the above trends have interacted to create potential billion-dollar state budget deficits for fiscals 2018 and 2019. After two previous rounds of massive tax increases to close earlier deficits, additional tax hikes and/or service cuts could very well further restrain job, income and output gains in 2017. Additionally, Connecticut industry specific employment disruptions, resulting from proposed healthcare mergers and the restructuring of the hedge-fund industry, could com- plicate the forecast. Lastly, the Federal Reserve is expected to continue to raise interest rates in 2017-18. The number, timing, and speed of these increases are likely to affect Con- necticut home sales, commercial and residential construction, business invest- ment as well as consumer retail spending. But 2017 may not be a lost year for Connecticut. President-elect Trump's cam- paign theme holds out the expectation of federal income tax cuts, substantial increases in public spending for infrastructure, transportation, and defense proj- ects, along with a rethinking of regulatory policies. Each of these might favor Connecticut employers and job creation. SCORECARDS Here is a quick snapshot of what four Connecticut economists and business professors think will happen to the state's economy in 2017.

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